It is utter contempt to even attempt picking holes in anything that Warren Buffett does but I could not resist myself from putting in a few thoughts relating to the great man�s vision for India that Indian will live better � 20 years hence.
First everyone knows that Indians will live better then what they are in 2030. Any attempt to quantify this statement would be boringly repetitive. But Mr. Buffett took about 20 years to predict what Indian would be in 2030. A man of his class and repute should have had his predictions the moment India opened its gates of liberalization in 1991 so here we go, no points for that prediction.
Secondly it is bizarre to see why he needs one year prior notice to be in India He can come through his private jet which he has named �The indefensible�. He can use that and be in this country of snake charmers as it was known a few generations earlier. Well, these days we have charmed the richest men from the Forbes list is a giant step for the Investing community but only a small one for India.
But why does he need to be In India to invest. From all the history he had invested in quite a few companies without being to the point of operation so the India trip is more for the formality then for the analysis.
Indian journalists, brokerages, analysts and research houses should realize that anyone coming to India is doing no favor to us. They are coming here for their returns and the opportunity that India presents. We do not need anyone�s mark of approval to discover ourselves. Indians have already discovered themselves. It is now the turn of the world to discover India.
Now to the question, what stocks will Buffett buy in India? Insurance, Banks, Consumers the list is limited and conceivable but what may be good for Buffett may not be good for the average Indian investor. Why?
Firstly the Warren through his company Berkshire would intend to invest at least US $ 5 billion in India if that investment is to make any (meaningful) difference to his overall returns.
With that kind of a corpus he would look at the top 100 names a few that come to mind are the HDFC twins (after all Deepak Parekh has modeled HDFC on the lines of Berkshire), an operating company that goes into Insurance with an Indian partner. I doubt if he would buy the existing insurance companies because he has his own standards of risk, Indian TV stations are a highly fragmented property and newspapers might just be living on its edge over the next 20 years so that is ruled out, most of the world class consumer companies that exist in India are subsidiaries of their US or European parents so that is not exclusive material either, credit rating agencies less said the better.
Buffett likes buying cheap so it might just happen that he buys absolutely nothing from the secondary market and concentrates on how he can get his operating business going. That helps India in the long run but who cares about the long run these days.
Personally I feel that we should be proud that at least when it came to investing in India Indians were ahead of the man who has been amongst the top 3 in terms of individual wealth. Whether the process of discovery for Indians about their own stock market was by default (regulations prevent them from investing abroad) or by design is inconsequential.
As for Buffett he took longer to invest in India because when he could have bought a company in Israel he could have identified a few outstanding businesses in India but as they say �Better late then never�.
You may be right that when the world's who's who comes to India, they are coming just for their "returns"; i.e., their selfish motive. But we are supposed to be optimists and always looks at the brighter or the positive side of it. When we talk of Mr Buffet coming to India and investing over here, there are lot of good points in it. It increases India's Brand Equity. It increases international confidence in India's market. It shows stability and potential of the Indian market. When the investment guru himself is investing here, then his students will follow him and we know that his students are no petty people. They are also giants in their fields. So lets be positive and hope that Indian market keeps up the progress.
"We have got one life, so why not strive for excellence"
Polio, Holidays, Momentary lapse of concentration, organized chaos, the brain storming is getting better by the day.
But Manish makes a good case for product vs. services and that is what I wanted to highlight ultimately it is the earnings that matter you can argue that Infy is services and Hindustan Unilever is a product but then as a shareholder what matters is earnings and cash flow.
Why do we compare India with China on infra only. China is ready with its infra for 2015 and the lack of infra is the opportunity in India.
We should compare RoCE of Indian companies with those of China and the West ultimately an investor will make only as much as the company makes on the investors money (RoE).
Anybody who has been compounding money at the rate Buffet has done and for the last many decades can never be behind the curve. The results are spectacular and a lot of us simply will not be able to replicate it. Perhaps we are getting ahead of the curve in our enthusiasm.
when the worlds greatest /biggest bond house has started to look eastwards , that too at equity, great investors will also sit up and take notice. even as of today it will be an interesting statistic to know what percentage of american households and in what percentage own an emerging mkt equity fund
I do not agree to the viewpoint. Buffet has always preferred to invest only in US because he feels there are so many opportunities to invest in the US itself that there is no need for him to go beyond that. He has gone on record with that. Secondarily, He did not invest in "countries" like China or Israel but in companies like BYD and ISCAR. One should note that in both these companies, the company contacted him through a letter. BYD, he tells he does not understand the company nor the technology, but Charlie Munger thought that the owner of BYD was a great person and hence it was a bet on the jockey. Iscar's founder wrote a two page letter to him highlighting his business and invited WB to Israel. He made up his mind even before going to the factory that he would love to work with the person who wrote it. The factory just confirmed that this is a great business. In either case he was still looking for businesses. If someone from India had sent a letter to him, I am pretty sure he would have considered an investment had it been attractive. Secondly, why do we expect someone who lives outside India to predict that India would be a success story way back in 1991. Very few in India predicted it. In fact it is in 2002-03, 11-12 years after opening up did the ripple effect of India opening up catch on and it is just in the last few years there has been significant wealth creation. Buffet never took pride in predicting macro stuff. Though I agree one can criticize him, these critiques do not stand base according to me.
Rgds
Pradeep
Indian companies wipe the floor with Chinese ones when it comes to RoE.
Chinese companies return about 9-10% while Indian companies return about 21% on average.
That is why India keeps growing at 8-9% despite having only a 30% savings rate and relatively low levels of foreign investment while China has a 50% savings rate and massive amounts of foreign investment but still grows only about 1-2% faster.
[QUOTE=yogishkamath] Indian companies wipe the floor with Chinese ones when it comes to RoE.
Chinese companies return about 9-10% while Indian companies return about 21% on average.
That is why India keeps growing at 8-9% despite having only a 30% savings rate and relatively low levels of foreign investment while China has a 50% savings rate and massive amounts of foreign investment but still grows only about 1-2% faster.
[/QUOTE]
Hi pretty interesting article
Posted on:5/4/2010 9:09:28 AMkaushalchawla
See...the beauty of India is it still survives and grows amongst "Chaos". To the outsider, India is chaos...everything (policies etc) are not well defined and implemented...infact everything is adhoc.....and hence they kind of fear investing in india....
And we are so used to this chaos that it seems organised (not very disturbing) to us....and thats where the beauty of India and Indian brain lies.